Who’s Training Your Retirement Navigator?

Think it’s hard to get objective advice about saving money for retirement? Try getting objective advice about taking out money during retirement.

Everyone has a vested interest. Brokerages, mutual-fund managers and insurance companies all earn fees on the investments they promote to retirees. Somehow, they always seem to make their own offerings sound the best.

Perhaps the biggest prize as investors take money out in retirement: the rollovers, or transfers, from 401(k) plans to individual retirement accounts. Cerulli Associates, a research firm based in Boston, estimates that workers rolled over nearly $358 billion from 401(k)s into IRAs last year—and that between 2014 and 2018, another $2.1 trillion will follow.

It is vital to understand a financial adviser’s potential conflicts of interest. Investors often ask how much their advisers are getting paid for selling specific products. It also is important to know who educated them in the complexities of retirement planning—something few investors think to ask.

Consider one firm that is prominent in this arena, Table Bay Financial Network of San Diego.

Table Bay trains certified public accountants and financial advisers on the ins and outs of the distribution and taxation of retirement assets. It pairs advisers with accountants who want to offer retirement planning to their clients. Table Bay also markets retirement products, including fixed annuities, to the advisers.

Table Bay is neither a distributor nor an investment adviser and it doesn’t interact directly with investors, says the firm’s president and head of marketing, Barry Bulakites.

The firm forgoes charging accountants and advisers for the training. Instead, it earns a share of revenue from annuities or other insurance products the advisers end up selling after learning about them through Table Bay.
“We believe that many Americans simply are oblivious to the fact that their IRAs and 401(k)s are tax-infested,” Mr. Bulakites says.

“People are just drifting into retirement completely unaware of the ramifications of taxes on these accounts and on their heirs,” he says. “The biggest thing we’re trying to get to is not to have the client make a mistake and impact their retirement in a negative way.”

Mr. Bulakites estimates that about 7,200 accountants have received some form of training from Table Bay; 200 to 300 of them, he says, work closely with the firm, including 57 who operate retirement-focused Table Bay affiliates called
America’s Tax Solutions.

Meanwhile, more than 250 financial advisers “from sea to shining sea” do business with Table Bay regularly, Mr. Bulakites says.

One adviser recently forwarded me two emails he had received from Table Bay. The first offered a Maserati to advisers who sell at least $7.5 million in annuities in 2014 and a BMW, Range Rover or Porsche for at least $6 million in sales.

The second email linked to a flier for a seminar featuring an index annuity paying a 9% commission. The flier promised that the seminar would help convert “shoppers” and “plate-lickers” into customers, producing “HUGE commissions.”

Could awarding Maseratis and other luxury cars encourage advisers to favor high-fee products that might not be ideal for clients?

“There’s layers of compliance [at brokerages and advisory firms] that won’t let an inappropriate product be sold,” Mr. Bulakites says. “We’re not the only one with offers like that. What this does is steer some of the business to us that would have been written anyway with those products.”

He says that the firm has removed the flier with the term “plate-licker.” That term, Mr. Bulakites says, is used among brokers to describe an investor who attends seminars not to learn about retirement strategies but simply “for the free meal.”

Mr. Bulakites says he conducts approximately 250 training sessions a year for accountants and advisers. His biography on Table Bay’s website says that he is “an innovator” in “the exploding retirement marketplace.”

Mr. Bulakites’s biography doesn’t mention a settlement in 2008 with the Department of Labor, in which he consented to be permanently barred from serving as a fiduciary to a retirement plan.

Under the terms of the settlement, Mr. Bulakites denied any wrongdoing. The government claimed that he had misappropriated money from the retirement plans of a small company in Connecticut.

Along with a partner and a firm they co-owned, Mr. Bulakites paid $500,000 to the retirement plans to settle private lawsuits over the same case, according to him and court records.

Mr. Bulakites attributes the problem to a series of internal miscommunications at the client company about the retirement plan. “What was claimed never happened,” he says. “No one ever proved that any money was missing or that we ever did anything wrong.”

All this is a reminder that when you hire a retirement adviser, don’t just ask what he knows. Ask who taught him what he knows.